FNMA 5s outperformed substantially recently on news of the creation of two $5 billion Megas.

Lehman Brothers analysts said the coupon tightened by nearly 10 basis points LOAS, outperformed swaps by 14/32nds and the rest of the coupon stack by 7-8/32nds. Analysts note the market response is due to concern that a large portion of new WALA pools are parked in bank portfolios that do not roll MBS. In this event, the TBA deliverable could shift to late 2004 and 2003 vintages that are worth more than 2005 originations.

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